Stock Market Week: Reuters' share price signals tougher competition and sales slowdown

Never bet against the stock market is a City adage which few dedicated followers of shares are prepared to challenge. It often displays an uncanny knack of predicting a company's fortunes.

Of course, when it is caught on the hop by an unexpectedly good - or bad - set of figures there is a predictably violent share price reaction. But when shares move ahead of figures there is a strong chance the market has sensed what is in store and has merely made the necessary adjustments over a few weeks or even months.

The Reuters share price has been signalling disappointment since October when the news information group produced reasonably encouraging quarterly figures. Then the shares were riding at around their 806p peak. Since then they have had an uncomfortable time, On Friday they closed at 642.5p, a 12-month low.

So not many City professionals expect much excitement when Reuters produces last year's figures tomorrow.

The City probably feels it is in a remarkably perceptive position to read Reuters. After all, it is a big user of the group's terminals, with many firms relying heavily on its news coverage, sophisticated data and dealing facilities.

Much easier, surely, to detect what is going on at one of its main suppliers than, say, an engineering works at Gateshead.

Dealers have, therefore, managed to read their own Reuters message - and that, quite clearly, is indicating competition is intensifying and demand slowing. Foreign exchange dealing, representing a big slice of Reuters' revenue, has declined sharply; the urge to merge in the financial sector is dramatically eroding the number of terminals its customers require.

There is also the question of competition. The takeover of ICV by Primark of the US is the latest example of information providers ganging together to make life more difficult for the renowned news agency. And there is the arrival of young start-up groups prepared to undercut the old master. The pound's power is another profit distraction.

No wonder stories circulate that Reuters needs new tricks. Its perceived vulnerability has helped fuel rumours it wants to descend on Dow Jones, the US information group.

Stories from New York suggest some Dow Jones shareholders are getting restless because of its less than sparkling share price performance. One fund manager, with a reputation for making things happen, has built a 5 per cent stake and is noisily agitating for some sort of action.

Reuters, it seems, will not make a hostile strike. It could, however, face a tough task getting the agreement of the Dow Jones management and shareholders loyal to the board. There is a sneaking suspicion Reuters' profits will look quite impressive. Say around pounds 690m, for a gain of pounds 91m on the previous year. But the gnawing fear is that the accompanying statement will be exceedingly cautious and the market, despite its record run, is not prepared to take prisoners. Even after their fall from grace, the shares, which have been richly rewarding in recent years, are still highly rated and there have been many examples of the market's lack of patience with fallen glamour shares.

It is widely believed Reuters' cash mountain has prevented an even sharper decline. The group withdrew proposals to hand back pounds 613m to shareholders in September when it abandoned innovative plans for a special dividend. It now has an embarrassment of riches - more than pounds 1bn - which should point to a bumper dividend payment, perhaps in the form of a special dividend.

The banking profits season is launched on Friday by Lloyds TSB. Financial shares, with banks to the fore, have led this year's blue chip charge which has sent Footsie to new peaks.

Takeovers, real and rumoured, and the knowledge that much of the financial sector is performing well have helped fuel the euphoria. There are fears that any banking disappointment could restrain the market's excitement.

While financials have soared more than 10 per cent this year, general manufacturing and service companies have achieved rather routine gains - nearer 0.3 per cent. Says Richard Jeffrey at Charterhouse Tilney: "Although equities are by no means overvalued at current levels, the upwards momentum that has been evident so far this year is probably a reflection of institutional liquidity".

He expects further progress until the summer when shares will "be ambushed by higher base rates and unsustainably fast growth in the real economy".

BZW sees Footsie at 4,400 points in a year. Richard Kersley and Steve Wright say higher interest rates and earnings slippage are "encouraging us to stick with our defensive stance". But the market "is of course going up".

They add: "While it might feel as if the market is blissfully ignoring the election, it is worth realising that when judged in relative terms, equities and gilts are as lowly valued ahead of this election as the last."

Alan Collins at Redmayne Bentley is one forecaster on target - but far too early. His estimate of Footsie at 4,250 points has already been topped. "In the absence of any Wall Street correction and meaningful rise in interest rates we may well have to repolish our crystal ball and raise our sights," he says.

Lloyds TSB should contribute to any further progress by producing profits around the market forecast of pounds 2.5bn, representing a staggering advance of pounds 850m. The figures will, however, include earnings from TSB, taken over in the final days of 1995. Full ownership of Lloyds Abbey Life should also contribute.

Other heavyweights reporting this week include British Airways, Unilever and British Petroleum. Today BA is expected to produce third-quarter profits little changed at pounds 104m and BP should tomorrow report fourth-quarter replacement cost income of some pounds 700m against pounds 539m. Unilever tomorrow, is set to top pounds 2.5bn, although currency movements could distort the figures.

Suggested Topics
Arts and Entertainment
The eyes have it: Kate Bush
music
Arts and Entertainment
booksNovelist takes aim at Orwell's rules for writing plain English
Arts and Entertainment
Al Pacino in ‘The Humbling’, as an ageing actor
filmHam among the brilliance as actor premieres two films at festival
News
Fifi Trixibelle Geldof with her mother, Paula Yates, in 1985
people
PROMOTED VIDEO
Sport
Mario Balotelli in action during his Liverpool debut
football ...but he can't get on the scoresheet in impressive debut
Environment
Pigeons have been found with traces of cocaine and painkillers in their system
environmentCan species be 'de-extincted'?
Arts and Entertainment
booksExclusive extract from Howard Jacobson’s acclaimed new novel
News
i100
Arts and Entertainment
A Pilgrim’s Progress is described by its publisher as “the one-and-only definitive record” of David Hockney's life and works
people
Sport
Loic Remy signs for Chelsea
footballBlues wrap up deal on the eve of the transfer window
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100
Arts and Entertainment
Art
Arts and Entertainment
Elizabeth McGovern as Cora, Countess of Grantham and Richard E Grant as Simon Bricker
TV
Life and Style
Instagram daredevils get thousands of followers
techMeet the daredevil photographers redefining urban exploration with death-defying stunts
Arts and Entertainment
Diana Beard, nicknamed by the press as 'Dirty Diana'
TVDaughter says contestant was manipulated 'to boost ratings'
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

C# .NET Developer (PHP, Ruby, Open Source, Blogs)

£40000 - £70000 per annum + Bonus+Benefits+Package: Harrington Starr: C# .NET ...

Data Analyst/Developer (Good education, Data mining, modelling,

£40000 - £70000 per annum + benefits+bonus+package: Harrington Starr: Data Ana...

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor